By Paul Ploumis 27 Jul 2015 Last updated at 08:26:19 GMT
NEW DELHI (Scrap Monster): The Indian government has finalized to issue Rs 15,000 crore worth gold sovereign bonds. The issue of the bonds will be held during the second half of the current fiscal year. As a preliminary step, it expects cabinet approval for the scheme at the earliest.
According to senior official belonging to the Indian Finance Ministry, the issuance of the bonds would provide big boost to government’s fund-raising efforts. The bond issuance is part of the government’s efforts to garner Rs 6 lakh crore during the current fiscal year, in order to meet its expenses. The sovereign gold bond is also help to curb demand for gold, which in turn may help to narrow down the country’s rising Current Account Deficit (CAD).
According to senior officials belonging to the Ministry, talks are being held with the RBI on interest rate to be offered to customers. The floor rate will be kept close to the rates on other government securities, he added. The interest rate of these bonds will be linked to international rate for gold borrowing. Initially, the scheme would not be linked to any government borrowing programme.
The scheme would be issued to retail gold investors in denominations of 2, 5, 10 grams and other sizes of gold. In order to protect the deposits from gold price volatility, the tenure of the bond will be fixed at minimum 5 to 7 years.
The Indian Finance Ministry had proposed launch of two new schemes- gold deposit scheme and gold-linked bond scheme, during the budget speech for Union Budget 2015-’16. The gold deposit scheme is aimed to mobilize the idle gold lying with Indian households and institutions, whereas the sovereign gold bond scheme is being considered as an alternative to purchasing metal gold.